We all have financial goals we would like to achieve. It can to save more money, get out of debt or even improve our credit scores. No matter how genuine the goals are, most people’s goals never become reality. In this article, I will share some tips on how to set smart money goals.
The key to setting goals we will actually realize to is to make sure they are SMART. If you know what SMART means, see below.
- Specific
- Measurable
- Attainable
- Relevant
- Timely
Designing SMART financial goals may help you get where you want to be with your money.
Setting Money Goals As SMART Goals
Let us break down each aspect of setting SMART goals.
1. Make Your Goals Specific
The more explicit and detailed you can be about your money goals, the better. Use specific numbers. Describe exactly how you would like to carry out your money mission.
For example, it is too broad to simply say you want to increase your emergency fund. A more specific goal would be:
I would like to increase my emergency fund by $600 over the next six months by auto-drafting $50 from my bimonthly paycheck to my savings account.
Being specific ensures you have a game plan to follow. Also, this allows you to know exactly what you are working toward and how to get there.
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2. Make Your Goals Measurable
Also, you will need to track your progress as you are working to meet your financial goals. This is why it is important to have something to measure. Your goal may be to pay an extra $100 above the minimum payment on your auto loan each month. You just need to ensure that you can measure it.
You might measure your goals in terms of a particular action. If you are looking to bring in more income, you might vow to fill out five job applications per week to positions in a better-paying field.
However you structure your goals, make sure there is something you can measure. This allows you to be able to assess whether you are making progress.
3. Make Your Goals Attainable
Setting an unrealistic goal is just setting yourself up for failure. While it is nice to shoot for the moon sometimes, you will have a better chance of meeting your objectives if they are actually attainable.
If you make barely over minimum wage and you live paycheck-to-paycheck, setting a goal to increase your savings by $20,000 in one year is probably unattainable. Factor in your current circumstances when drafting your financial goals.
Ask yourself:
Does this seem realistic for me to achieve? What hurdles will I have to overcome? Will I burn out trying to do something nearly impossible?
Goals are meant to be challenging, but they should be attainable as well.
4. Make Your Goals Relevant
Knowing the “why” behind creating your goals is essential. It is not enough to just say you want to raise your credit score. Saying you want to raise your credit score by 80 points so you can get approved for a mortgage is a much stronger goal.
Your money goals should tie into what you want to see happen in your life. Make your goals significant and relevant by exploring why you want to see them to fruition.
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5. Make Your Goals Timely
Deadlines can be annoying, but they are very necessary when it comes to achieving a goal. Give yourself a date for when you would like to see your goal accomplished. Your goal then becomes timely because you have got a deadline to make it happen.
Be specific and realistic about your timeline. It would be great if you can break down segments of your goal and give them their own timelines.
Say, for example, you would like to purchase a home in the next 12 months. Perhaps you spend the first five months paying down debt. Then, you spend the next five months building up your savings for the down payment and closing costs. Lastly, you can dedicate the remaining two months to touring houses within your budget.
Craft your goals around something you can take action on now so you can start making progress toward achieving them sooner rather than later.
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